Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Caesars Entertainment Inc (CZR, Financial) reported consolidated net revenues of $2.8 billion and total adjusted EBITDAR of $1 billion, both flat versus the prior year.
- The Las Vegas segment delivered a same-store second quarter net revenue record of $1.1 billion and adjusted EBITDAR of $514 million, beating the prior year by 1.2%.
- Recent room renovations at the Versailles Tower at Paris and Colosseum Tower at Caesars Palace are driving above-plan returns on investment.
- Caesars Digital delivered second quarter net revenues of $276 million, up 28% year-over-year, and set a quarterly adjusted EBITDA record of $40 million.
- Strong free cash flow generation of over $100 million in Q2 was applied to permanently reduce the 2030 Term Loan B, extending the maturity profile significantly.
Negative Points
- Adjusted EBITDAR for the regional segment was $469 million, down 8% year-over-year, driven by competitive pressures, construction disruption, and difficult comparisons.
- Las Vegas EBITDAR margins of 46.6% were down 40 basis points year-over-year despite increases in labor costs.
- The regional segment faced significant headwinds, including construction disruption in New Orleans and a large group event in Reno not recurring this year.
- The company is still dealing with peak construction disruption in New Orleans, which will continue into the third quarter.
- The regional segment is expected to face similar headwinds in the third quarter, potentially leading to another year-over-year decline.
Q & A Highlights
Q: Can you talk about the sustainability of the favorable relationship between casino revenue and gross gaming revenue in Las Vegas?
A: Our approach to promotions in Vegas has not changed. We have pricing power in Las Vegas, and our team has continued to raise the bar. Despite $76 million of headwinds since Q2 2022, our EBITDA is down only a little under $30 million, which speaks to our team's efficiency. - Tom Reeg, CEO
Q: Can you provide insights on the iCasino segment's growth and its impact on overall profitability?
A: iCasino is more profitable from a margin perspective than sports betting. We expect solid volume growth starting this quarter, with hold continuing to grow. This should compound as we head into the back half of the year. - Eric Hession, President Caesars Sports and Online Gaming
Q: How do you view the impact of the World Series of Poker on your properties?
A: This was our best World Series ever from a financial perspective. It benefits our hotel, table games, slot play, and food and beverage. The event makes between $20 million and $25 million annually in EBITDA. - Tom Reeg, CEO and Eric Hession, President Caesars Sports and Online Gaming
Q: Can you elaborate on the expected performance of the Las Vegas segment in the back half of the year?
A: We expect Vegas to grow in the second half of the year, both in Q3 and Q4. However, we would need a swing in hold to offset the impact from Q1 to be a grower for the full year. - Tom Reeg, CEO
Q: How do you plan to manage the increased OSB tax rate in Illinois?
A: The impact to us is under $5 million a year. We are not planning to change our behavior based on this change. If competitors reduce their reinvestment levels or odds, it could be beneficial to us. - Tom Reeg, CEO
Q: What are your thoughts on potential M&A activities given your current stock price?
A: We are mindful of generating shareholder value through M&A. However, I am not an issuer of stock at current levels. We will focus on reducing debt and potentially buying back stock as we generate significant free cash flow. - Tom Reeg, CEO
Q: Can you provide more details on the expected performance of the regional segment in Q3?
A: We are facing the same headwinds in Q3 as in Q2, including construction disruption in New Orleans and competition in Indianapolis. We expect regional performance to fall short of 2023 in Q3 but anticipate growth in Q4 as new projects come online. - Tom Reeg, CEO
Q: How do you plan to manage expenses and maintain margins across your segments?
A: We constantly strive to run more efficiently, which is reflected in our margins. Despite significant labor cost increases in Vegas, we have managed to maintain margins. We expect this trend to continue. - Tom Reeg, CEO
Q: What is your strategy for launching the new Horseshoe iGaming app?
A: We will launch the Horseshoe app state by state, starting with Michigan in September. While it will perform strongly, it may not command the same market share as the Caesars Palace app, which remains our flagship. - Eric Hession, President Caesars Sports and Online Gaming
Q: Can you discuss the potential sale of non-core assets?
A: We do not plan to sell any operating casino assets. However, we may sell non-core, non-operating assets if they can trade at a significantly accretive multiple. - Tom Reeg, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
